Missouri Gas Energy seeks 44 percent increase in gas charges

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Missouri Gas Energy seeks 44 percent increase in gas charges

By STEVE EVERLY - The Kansas City Star Date: 01/10/01 22:15

Missouri Gas Energy is seeking a 44 percent increase in what it charges for gas, a move that all but ensures that heating bills compared to the same period last year will more than double for the rest of the winter.

The utility filed the request late Tuesday with the Missouri Public Service Commission, which is asked to improve the increase. The price increase, which is likely to be granted, would go into effect Jan. 24, said Dan Beck, a utility regulatory engineer for the commission.

Missouri Gas Energy is the first gas utility in Missouri to use an option this winter that allows an extra adjustment in the purchased gas adjustment. Normally, only changes in April and November are allowed.

The size of the increase in part stems from the utility's decision last year against using hedges in the financial markets to cushion natural gas prices. It had done so for three years, but prices never rose high enough for the hedges to be triggered.

"At the time we didn't hedge, we didn't think prices would end up as high at they are," said Paul Snider, spokesman for Missouri Gas Energy, which serves 491,000 customers, mostly in the Kansas City area.

The proposed increase means the company's customers can expect sharply higher bills, even if the weather is warmer than normal for the rest of the winter.

For example, last February, which was unusually warm, an average Missouri Gas Energy bill was $110. Using the same amount of gas this February, that customer would pay $248.

"We realize this is a tremendous amount," Snider said.

Temperatures this week have warmed, but WeatherData Inc. predicts slightly below normal temperatures for much of the rest of the winter. The last two months of 2000 were colder than normal.

Utilities nationwide have been passing on higher gas costs since last spring. Most of their gas price contracts are based on first-of-the-month prices. In the last month, natural gas prices have spiked to record levels and consumers now have to absorb those costs. But not happily.

"Oh, my heavens," said Missouri Gas Energy customer Janice Parker when told of the increase being sought by the utility. "This is outrageous, what are we going to do?"

For consumers, the main defense for now is to turn down the thermostat to conserve and to sign up for the utility's level payment plan. Under the plans, winter's heating bills are spread out across the year.

Missouri Gas Energy's request filed Tuesday would affect the purchased gas adjustment of the gas bill, which includes the wholesale cost of gas plus storage and transportation. Since Nov. 1, the utility's purchased gas charge has been $6.81 per thousand cubic feet.

That's nearly double the charge from last February. But if the utility's request is approved, the purchased gas charge will rise to $9.81 per thousand cubic feet.

State regulators said they have indications that other Missouri utilities will seek to increase their purchased gas adjustments. Utilities in other states are also passing along their gas costs. Kansas Gas Service, for example, now has a cost-of-gas charge of $8.68 and can change it again next month. Kansas Gas should know by the end of January whether to seek another rate boost.

Such adjustments are typically approved. Missouri Gas Energy's request will likely be granted, although it could be altered slightly.

With heating bills rising sharply, more questions are emerging about how consumers must pay for the gas costs passed along by utilities.

"It behooves us all to rethink what we are doing," said Doug Micheel, senior counsel for Office of Public Counsel in Jefferson City, a state agency that argues on behalf of consumers before state regulators.

Regulated utilities operate under rules that require them to get the best gas price that's prudently possible. But typically that has meant little more than passing along the most recent wholesale price.

In Missouri, utilities can expect additional scrutiny of their gas purchasing practices. David Sommerer, manager of the gas procurement division of the Public Service Commission, said the agency is now receiving additional information about the purchasing practices of utilities.

He said the review will concentrate on whether a utility diversified its gas contracts. For example, a company might have a mix of short-term contracts at market rates and longer-term fixed-rate contracts that would have been lower than current market rates. The commission will also look at what hedging programs, if any, were used to help cushion prices.

Documents filed by Southern Union, the parent company of Missouri Gas Energy, show that the utility relies on short-term contractors. Snider, the Missouri Gas spokesman, said the utility does not have a significant number of long-term contracts.

Wholesale gas prices have more than quadrupled from a year ago to just under $10 per thousand cubic feet. Traders have attributed much of the increase to tight supplies aggravated by colder weather in November and December.

But others have said supplies are sufficient. That position was repeated Tuesday by the American Gas Association, which said it expects adequate gas supplies for the remainder of the winter.

Illinois and a few other states have opened investigations seeking to discover if manipulation or other forces besides supply and demand are behind price increases.

To reach Steve Everly, call (816) 234-4455 or send e-mail to severly@kcstar.com

http://www.kcstar.com/item/pages/home.pat,local/37750aff.110,.html

-- Martin Thompson (mthom1927@aol.com), January 11, 2001


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